Downloads of Apple’s (NASDAQ:AAPL) iPhone and iPod Touch Apps increased five-fold from an estimated 400 million in 2008 to about 2.2 billion in 2009. We expect downloads to continue growing rapidly as the number of app capable devices in use (iPhones, iPod Touches, iPads) increase.
We forecast iPhone App downloads to reach around 52 billion by the end of the Trefis forecast period. Furthermore, there could be an upside of $6 (2%) to the $267 Trefis price estimate of Apple’s stock if app downloads were to reach 100 billion by the end of our forecast period.
Below we discuss the growing popularity of iPhone Apps, and why we believe iPhone Apps download could continue to show fast growth.
Growing Popularity of iPhone Apps
iPhone apps are software applications sold through the iTunes store and downloaded onto a user’s iPhone or iPod Touch. Users can download apps for things like websites (Facebook, Yelp) and games (Poker, BlackJack, Align Five) as well as a variety of other software applications.
Three reasons why we believe Number of iPhone Apps downloads will continue to increase at fast rate:
1. More iPhone users will mean more iPhone Apps downloads
For every additional sale of an iPhone, the Number of Apps Downloads increases multi-fold. iPhone sales have shown a healthy growth since the device was launched in July, 2007. The number of iPhones sold has increased from 3.7 million in 2007 to 25 million in 2009.
We iPhones sold to increase to 207 million by the end of Trefis forecast period. This translates to an increase of iPhone market share from 2% in 2009 to 11% by the end of Trefis forecast period in the global mobile phone market.
2. Apps downloads from iPad itself could reach 3 billion
We estimate that Apple will be able to sell 12 million iPads by the end of Trefis forecast period. Since we estimate 207 million iPhone users will download around 50 billion applications. Using the same app to iPhone ratio, we estimate there could be 3 billion application downloads from iPads alone by the end of the Trefis forecast period.
3. Applications are a cheap source of owning games and tools
iPhone Apps have become a popular source of owning games and tools at a low price. For example, users can download popular games like Tiger Woods for as low as $10, and applications like Skype for free.
2% Upside to Apple’s Stock if Number of Apps Downloads Increase to 100 Billion
Apple and makes money by taking a cut of 30% of the purchase price of an app, while the rest goes to the developer. Consequently, if a larger number of apps are sold and some of those apps are paid apps, then Apple’s app revenues and profits increase.
Although we forecast that the number of app downloads will increase to 52 billion, there could be a $6 (2%) upside to the $267 Trefis Price estimate for Apple’s stock if the number increased to 100 billion by the end of Trefis forecast period.
You can modify our forecast for iPhone App downloads above to see how Apple’s stock would be impacted if app downloads were to increase more than we forecast.
For additional analysis and forecasts, here is our complete model for Apple’s stock.
